Commercial leases can be complex, so it is important to know what you are getting into before signing one. That’s because once both parties have agreed to the terms of the lease, it is legally binding and can be enforceable in court.

A well-written commercial lease agreement can help to prevent disputes and ensure that both parties are clear about their rights and obligations. If you are signing onto a new lease, make sure you’re aware of all the ins and outs of your commercial real estate lease so you can avoid common pitfalls.

Commercial Lease

A commercial real estate lease is a lease agreement between a tenant and a landlord for the use of commercial property. The property may be used for business purposes, such as retail, office, or industrial space. Commercial leases are typically longer in duration than residential leases and often include more specific terms and conditions.

The lease terms are negotiated between the parties and set forth in a written agreement. The length of the lease term, the amount of rent, and the provisions for renewal are all typically negotiable.

Commercial leases typically have a “common law” clause, which gives the tenant certain rights even if they are not expressly stated in the lease agreement. For example, the right to quiet enjoyment, which means that the tenant has the right to use the property without interference from the landlord.

The common law clause also typically includes a “covenant of good faith and fair dealing,” which means that both parties must act in good faith and not take any actions that would undermine the purpose of the lease agreement.

What Should be Included in a Commercial Lease Agreement

The agreement should outline the terms of the tenancy, including the lease duration, the amount of rent, and any restrictions on use. It should also outline the responsibilities of both parties, such as the landlord’s responsibility to maintain the property and the tenant’s responsibility to pay rent and follow any restrictions.

Some of the key terms that should be included in a commercial lease are:

• The identity of both parties (business tenant and landlord), as well as the guarantor if necessary,
• The term of the lease, which is the length of time the tenant will have exclusive use of the property;
• The rental amount, which is the amount the tenant will pay to the landlord to rent the space;
• The security deposit, which is typically equal to one month’s rent and is used to cover damages to the property or non-payment of rent;
• The description of the premises, which should include square footage, number of rooms, and any special features or amenities;
• The use clause, which specifies what types of businesses or activities are allowed on the premises where you will be conducting business;
• The subletting clause, which allows or prohibits the tenant from subletting the space to another business and;
• The repair and maintenance clause, which outlines who is responsible for making repairs and maintaining the property.

Finally, the agreement should contain provisions for late payment of rent, damage to the property, and termination of the business lease. By including these key elements, you can help to ensure that your commercial lease agreement is clear and enforceable.

How to Ensure the Lease is Legally Enforceable

To ensure your commercial real estate lease is legally enforceable, if there is ever a dispute where it needs to be used as evidence in court, you need to make sure that all of the terms of the agreement are clear and concise. This means specifying things like the length of the lease, the amount of rent, and any other essential details.

You need to make sure that both parties have signed the agreement. In some cases, it may also be necessary to have the agreement notarized or for there to be a witness present for the signing. Once both parties have signed, keep a copy of the agreement on file so that you can reference it if there are any disputes down the road. By taking these simple steps, you can help to ensure that your commercial lease agreement is legally enforceable.

Types of Commercial Leases

There are generally three types of commercial leases: net, gross, and triple net. A net lease is when the tenant is responsible for paying their prorated share of property taxes, property insurance, and maintenance. This can be a good option for businesses that want to have complete control over their space and don’t mind paying a bit more in rent.

A gross lease is when the landlord pays for these additional expenses and includes all of those costs in the base rent price. This can be a good choice for businesses that want to save money on their monthly expenses.

Lastly, a triple net lease is when the tenant pays for all additional expenses related to the property, including but not limited to property taxes, building insurance, and maintenance costs. This is typically the most expensive type of lease. Still, it can be a good option for businesses that want a high level of control over their new space.

Each type of lease has its own advantages and disadvantages, so it’s important to choose the one that best suits your needs. Speak to a commercial lease lawyer to learn more about which lease terms are right for your situation.

Things to Keep in Mind Before Signing a Commercial Lease

By taking the time to thoroughly review a commercial lease, you can avoid potential problems down the road. Keep the following things in mind before signing a lease for a new office space.

1. KNOW THE TERMS OF THE COMMERCIAL LEASE

   Before signing a commercial lease, it is crucial to understand all of the terms and conditions. For example, make sure you know how long the lease is for, what the rent will be, and what kind of maintenance and repairs are included in the lease agreement. If there are any terms that you do not understand, be sure to ask your lawyer, landlord, or leasing agent for clarification.

2. KNOW WHAT KIND OF SPACE YOU NEED

   Make sure to take into account how much space you will need, what type of space it is, and any other special requirements. Often there will be tight restrictions on getting out of a lease, so you don’t want to outgrow a space before the terms of your lease are up or sign onto a lease where you can’t perform the activities you intended to.

3. PAY ATTENTION TO THE DETAILS

   When reviewing a commercial lease, it is important to pay close attention to the details. For example, you should check to see if the lease includes a clause that allows the landlord to terminate the lease early if certain conditions are not met. You should also make sure that you understand the implications of any clauses that allow the landlord to make changes to the terms of the lease. These will be different for every lease. Therefore, it may be helpful to run the agreement by a trusted legal professional before signing it so they can explain the details to you.

4. UNDERSTAND YOUR RESPONSIBILITIES

   Be aware of what is expected of you as a tenant, such as paying rent on time, maintaining the property, and adhering to any rules or regulations set by the landlord. Likewise, there may be additional costs associated with renting commercial property, such as maintenance fees or utility bills. Make sure you are aware of all costs before signing the lease agreement so you are not in for any surprises.

5. KNOW YOUR RIGHTS

   As a tenant, you have certain rights that should be spelled out in the lease agreement. Familiarise yourself with these rights so that you can protect yourself if needed.

6. DO YOUR RESEARCH

   It is in your best interest to do your research into the landlord and the area you will be renting a space in. Since you are entering into a business relationship with a landlord or the business owner, you want to be aware of their financial situation and relationship with current or past tenants. For example, if they default on their mortgage, you don’t want to be forced out of your space.

7. NEGOTIATE THE TERMS OF YOUR LEASE

   When signing a commercial lease, it is important to protect your interests. For example, you can try to negotiate a clause that allows you to terminate the lease early if the business is not doing well, gives you access to additional parking spaces, and more. You should also make sure that you are not responsible for any damage that is caused by the landlord or other tenants.

8. SEEK LEGAL ADVICE

   If you are unsure about any of the terms of a commercial lease, it is always a good idea to seek legal advice. A real estate lawyer can help you understand the implications of the agreement and can offer guidance on how to protect your interests.

The Differences Between a Commercial Lease and Residential Lease

The main difference between the two is the use of the property. A commercial lease is for businesses, while a residential lease is for individuals. In addition, commercial leases are typically longer than residential leases, and the terms are often negotiable. This is because businesses generally need more stability than individuals when it comes to their location.

Commercial leases also tend to be more expensive, as businesses need more space and often have special requirements. For example, a restaurant will need a kitchen, while a retail store will need space for displaying merchandise. Commercial leases can also contain specific clauses that are designed to protect the business, such as a clause that allows the business to terminate the lease if the property is not suitable for its needs. In comparison, residential leases tend to be more straightforward.

How to Terminate a Commercial Lease Agreement

When either party wishes to terminate the lease agreement, they must follow the proper procedure to do so. In most cases, the landlord or tenant must give written notice to the other party, specifying their intention to end the lease agreement. Next, both parties should discuss their options and come to an agreement on a new lease term or an early termination fee.

However, if the tenant violates the terms of the lease, the landlord can give them notice and start the eviction process. The lease may also be terminated if the property is sold or condemned.

In some cases, the parties may agree to terminate the lease early. This can be done by negotiating a buyout or by having the tenant find a replacement tenant to take over the remainder of the lease term.

Ultimately, how a commercial lease agreement is terminated will depend on the specific terms of the agreement and the laws of the province where the property is located. Consult with an attorney to see if there are any legal options available. Each situation is unique, so it’s essential to choose the approach that makes the most sense for your individual circumstances.

Attornment and Non-Disturbance Agreements

In the real estate industry, it’s not uncommon for a tenant to outlast the landlord. When this happens, the new owner of the property is legally obligated to honour the terms of the lease. However, there are often cases where the new owner wants to evict the tenant or make changes to the property that would violate the lease agreement. To protect their interests, tenants can request an “attornment” from the new owner.

An attornment is a legally binding agreement that requires the new owner to honour the terms of the lease. In addition, a non-disturbance agreement can be used to protect tenants from eviction or other disruptive actions by the new owner. By using these agreements, tenants can be sure that their rights will be respected even if the ownership of the property changes hands.

Signing a commercial lease can be a big decision, but it doesn’t have to be a difficult one. If you keep these things in mind, you can avoid common pitfalls and negotiate a lease that is favourable for you and the long-term success of your business.

At DLegal, we see lease agreements and manage commercial lease disputes across a variety of industries on a day-to-day basis. We have an in-depth understanding of what to expect and what leverage we can use during negotiations. Having represented both tenants and landlords, we have a great understanding of the needs and interests of both sides. Feel free to reach out to us today if you need legal advice or guidance.